An additional residential unit (ARU) is a self-contained home, with its own kitchen, bathroom and entrance, that shares a lot with a main house. Under Ontario's More Homes Built Faster Act, 2022, most urban residential lots with municipal water and sewer can have up to three homes: the main house plus two additional units, without a rezoning. Kitchener and Waterloo go further and allow up to four on many lots. You need a building permit for every new unit; you only go to the committee of adjustment if your plan doesn't meet the zoning rules.
Different cities also call it an additional dwelling unit (ADU), accessory dwelling unit or secondary suite. They all mean the same thing, and this page uses "additional unit".
What's allowed in Waterloo Region
Under provincial law, every municipality must allow up to three units on a residential lot in a settlement area with full municipal water and sewer services. The three-unit rule came in with the More Homes Built Faster Act, 2022 (Bill 23), in force since November 28, 2022. The three can be arranged two ways:
- Up to three units in the main house, such as a house with a basement unit and an upper unit; or
- Up to two in the main house and one in a separate building, such as a house with a basement unit and a backyard suite.
The province also stopped municipalities from requiring more than one parking space for these units. Each city and township then sets its own details in its zoning bylaw, and some allow more.
| Municipality | Units allowed on a typical lot | Details |
|---|---|---|
| Kitchener | Up to 4 | On many lots with a detached house, semi or street townhouse, approved by council March 25, 2024. Lot width, servicing or hazards limit some lots to one or two. A backyard building can hold one or two units. |
| Waterloo | Up to 4 | On many low-rise residential lots: the main house plus up to three additional units, with at most one coach house (backyard) building. |
| Cambridge | Up to 3 | Main house plus two additional units: up to three in the main house, or two in the house and one in a separate building. Rules in section 4.19 of Zoning By-law 26-007. |
| Woolwich | Up to 3 | Up to two additional units in specific zones: no more than one in the main house and one in a detached building. |
| Wilmot | Up to 3 | Zoning allows one additional unit in the house and one in a detached building, with one parking space for each. |
| Wellesley | Up to 3 | Zoning allows one attached unit (two bedrooms at most) and one detached unit (up to 84 m², about 900 sq ft) per lot, in certain zones. |
| North Dumfries | Check with the township | Zoning allows secondary units in the house and coach houses; a garden suite needs a temporary-use zoning amendment. |
The township rows are a summary of each zoning bylaw; the provincial three-unit rule applies on top where a lot has full municipal services. Many rural lots in the townships run on a well and septic system, and the provincial three-unit rule doesn't automatically apply to them. Before you plan anything, ask the city or township's planning department what your specific lot allows.
Basement units, backyard suites and duplex conversions
The three common ways to add a unit are a basement apartment, a separate backyard building, or splitting a house into two or more units. Which one fits depends on the house, the lot and the budget.
Basement units
A basement unit is usually the least expensive way to add a home, because the structure is already there. The work is in meeting the Ontario Building Code: ceiling height, windows big enough to escape through, a fire separation between units, smoke and carbon monoxide alarms, and a separate exit. Older basements often need underpinning or lowering the floor to get enough height, and that's where costs can jump.
Backyard suites
A detached unit in the backyard (also called a coach house, laneway house or garden home) is a new building, so it usually costs more than a basement unit. It needs room on the lot: setbacks from the lot lines, a path to the street, and space for water, sewer and power connections. In Kitchener, a walkway at least 1.1 metres wide is required to the entrance of each unit whose door doesn't face the street.
Under Ontario's Planning Act, a "garden suite" has a narrower meaning: a temporary, portable unit, allowed only through a temporary-use zoning bylaw. A permanent backyard unit is an additional unit, not a garden suite in that legal sense. North Dumfries, for example, doesn't allow garden suites as of right in any zone.
Converting to a duplex or more
Splitting a house into two, three or four units (an up-down duplex or a triplex) can mean more work on fire separations, separate exits, and plumbing, heating and electrical for each unit. In Kitchener, a three- or four-unit lot also needs 30% of the rear yard kept as landscaping and an enclosure for the garbage containers.
An additional unit usually can't be split off and sold separately. Kitchener notes that a plan of condominium is one way to sell units individually; talk to a real estate lawyer before you plan on it.
Permits, fire separation and parking
Every new unit needs a building permit before construction starts, and inspections as the work goes. That applies to a basement unit in an existing house as much as to a new backyard building.
What a permit usually involves:
- Zoning review. The city checks your plan against the zoning bylaw: number of units, setbacks, size limits, parking and entrances. Woolwich asks for a Zoning Compliance Certificate before you apply for the building permit.
- Building Code drawings. Plans showing the layout, fire separations, exits, windows, ceiling heights, plumbing and ventilation. Many owners hire a designer with Building Code qualifications.
- Other permits. Electrical work generally needs an Electrical Safety Authority (ESA) permit. Widening a driveway can need a separate permit, and a property on a regional road may need a permit from the Region.
- Parking. The province caps what a municipality can require for these units at one space each, and some cities require less, especially near transit. Check your city's zoning for the exact number.
Units built without a permit are a common problem when buying a house. North Dumfries, for example, requires the owner of an existing second unit built without a permit to get one, so it meets building and fire code standards. If you're buying a house with an existing unit, ask whether it was built with a permit.
Some cities also license rentals. In Waterloo, rental units in buildings with four or fewer units need a rental licence from the city. Ask your city whether a licence applies before you rent the unit out.
When you need a minor variance
If your plan doesn't meet the zoning bylaw and can't be changed to fit, you apply for a minor variance to the committee of adjustment. A minor variance is permission to depart slightly from a zoning rule, such as a smaller setback or one less parking space, for one property.
The committee of adjustment is a panel appointed by each city or township council. It holds public hearings, usually monthly. Under Ontario's Planning Act, it weighs whether the change is minor, whether it's appropriate for the property, and whether it keeps to the general intent of the zoning bylaw and the official plan.
How it works in Kitchener, as an example:
- Talk to planning staff first; they recommend it before you file.
- File the application with drawings and the fee. Kitchener's 2026 fee is $1,800 for four or fewer units.
- The city mails notice to owners within 30 metres, advertises the hearing, and posts a sign on the property.
- You (or your agent) attend the hearing to explain the request. Neighbours can comment.
- The committee decides, often with conditions. There's an appeal period before the decision is final.
Each municipality has its own committee, fees and meeting schedule: see Kitchener's committee of adjustment and Waterloo's minor variance page, and ask Cambridge or your township's planning department for theirs.
Costs, rent and what a unit does to value
Building costs for an additional unit vary too much from house to house to give one number; get quotes from contractors and a designer for your house. A basement unit in a house with good ceiling height and a separate entrance can cost far less than one that needs underpinning, and a backyard building costs more than either.
Fees and development charges
Ontario stops municipalities from charging development charges (fees new construction pays toward roads, pipes and other city services) on a second and third unit added to an existing house. What that means locally:
- Cambridge says the City and the Region don't collect development charges for additional units; the school boards may in certain cases.
- Waterloo's 2025 guide says the city doesn't charge them when you add one or two units to an existing house, only on a third additional unit (the fourth unit). Waterloo passed a new development charges bylaw on March 23, 2026, so confirm the current rule.
- Kitchener lists development charges among the possible fees and calculates them case by case.
Budget for permit fees, drawings, utility connections, and any committee of adjustment fee on top of construction.
What units rent for in Waterloo Region
Here's the latest October Rental Market Survey from the Canada Mortgage and Housing Corporation (CMHC) for the Kitchener-Cambridge-Waterloo area: average rent by bedroom count, the vacancy rate, and the change in average rent from the year before.
| Unit | Average rent | Vacancy rate |
|---|---|---|
| Studio | $1,255 | Not reported |
| 1 bed | $1,546 | 4.7% |
| 2 bed | $1,816 | 3.9% |
| 3+ bed | $1,861 | 1.8% |
| All units | $1,716 | 4.0% |
CMHC Rental Market Survey, October 2025, Kitchener-Cambridge-Waterloo: purpose-built rental apartments. Average rent on units surveyed in both years changed 3.3% from the year before. Condos and basement units rented out aren't included.
CMHC's averages include long-term tenancies, so asking rents for a newly built unit are often higher. Check current listings for similar units near you as well.
Value and property tax
A legal additional unit can add rental income and flexibility (a home for family, or income to help with the mortgage), and buyers of multi-unit homes look closely at whether units are legal. How much it adds to a sale price depends on the house and the market. Adding a unit can also raise your MPAC assessment, and with it your property tax; see property tax in Waterloo Region.
Rent control on new units
A new unit first occupied as a home after November 15, 2018 is exempt from Ontario's rent increase guideline. The Ontario government says that covers most new basement apartments, along with new buildings and additions. That means you can raise the rent by any amount, but only once every 12 months and with at least 90 days' written notice on the Landlord and Tenant Board (LTB) form.
Everything else in the Residential Tenancies Act, 2006 (RTA) still applies: how tenancies end, repairs, and the rules for the LTB. Keep your permit and occupancy records, since they show when the unit was first lived in. See the rent control guide for the full rules.